Monday, June 09, 2014

WHY EMERGENCY OR CONTINGENCY FUND CREATION?


** HAVE YOU GONE THROUGH ANY EMERGENCY SITUATION IN THE PAST??
** HOW MANY MONTHS, WOULD YOUR FAMILY BE ABLE TO DO WELL, WITHOUT AN            INCOME??

People who have gone through above situations, need not be explained ( just revisit) the topic question, for persons who haven’t, just imagine that you are in anyone or both situation , what would you do then?

OK. Options ???-

A.      Borrow ?
B.      Use some current liquid assets or investments , to fund those situations?
C.      Friendly Hand Loan?

Again those who have experienced and gone through the above situation would agree and know how worst such situation is ( as they have felt it, such situations are very hard to imagine)


Now, through my experience, I have noticed that the main bread earner or Primary person always thinks that I can handle any situation, but what if the main bread earner or primary person is in trouble and if the secondary person ( Wife or children or parents) has to face the emergency and has to -

A-Borrow,
or
B-Use some current Asset or Investment, to fund such situation ( it’s another case were the family should know were and how?),
or
C-Ask for friendly Hand Loan?

S C A R Y situation.? Right?



Friends and readers, this is Practicality, with day-to-day expenses and also medical expenses ever increasing, AND uncertainty in business and employment economic situations, it has become inevitable keeping aside EMERGENCY/CONTINGENCY Fund.

I am sure all would agree FINANCES and INVESTMENTS is like a puppet, if one string stretched another reacts.
Similarly, if in an Emergency if any of the above A / B / C is to be activated this will have a impact on overall finances.

Normal Avoidence  Creating Emergency Fund…..

A-Someone said I have medical Cover, then why would I require such funds /corpus-very valid question, but I say are all family members covered for all possible situations? i.e.
*Who has Valued, how much Medical Cover required? may be the cover is not enough
*All Medical Covers
*Waiting Periods
*If the Hospital is not under Cashless
*Critical Illness- Prolonged term illness has two effects ONE Increasing Regular expenses and TWO somewhere income earning capability reduces
*If Accidents happen and has prolonged period effect somewhere income stream will affect, but expenses would not stop, rather increase
*if the main Bread earner is effected

B-Someone says , I always keep Gold and/or  Cash at home  and/or Fixed Deposit in Savings Bank for such situations…..Well very well at least thought of, planned, but,

*How much and where…. *Keeping cash or gold in Cupboard is considered dead investment, and we don’t know  how much and when,so that may be lying idle for years
( very important to value this and still generate returns out of this)

C-I have lot of Investments-good, are they available immediately and does every family member know what, when and how to take out  those investments or basically whether some investment is available?

D-I have given some amount of Loan to friend/partner, which is available anytime?Well I need not take you through situations where the Friend/partner is genuine and willing, but may not be available to pay , when you require the most.

E-Well I keep some amount in Savings or Salary A/c, which I can withdraw through ATM or online banking transfers can happen….Well best, but do we generally share our ever changing Bank Passwords to anyone on regular basis?

F-I won’t have any emergency? OK, I wish and Pray to Lord to not have any emergency to anybody in the world, but can one be that sure?




Well this Fund is very very important and would say , it Forms base of any Financial Plan.While Emergency situation is not welcome to anyone and should not occur to anyone, but it cannot be ignored that it exists to me.






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